subject: The Story Behind a Foreclosed Property [print this page] The Story Behind a Foreclosed Property The Story Behind a Foreclosed Property
If you hear the words foreclosed property, what comes into your mind is a repossessed home sold at a staggeringly low price. Many smart investors have made foreclosure properties their cash cow for the sole reason that they can be bought at very low prices.
Foreclosure properties represent so many income-earning opportunities for real estate investors. However, before you go out and buy a foreclosed home, you must understand first the foreclosure market. There is a reason why a foreclosed property is cheap and knowing this reason will help you protect your investment.
What are Foreclosures?
A property is foreclosed when its homeowner failed to pay his mortgage despite repeated demands from a mortgage lender. Divorce, unemployment, sickness, death in the family and business failure are some of the common mitigating circumstances that hinder the homeowner from paying the loan that he took out to purchase his property.
In this case, the mortgage lender has no choice but to foreclose the property. The foreclosure process varies by state, but usually, a mortgage lender can start the process of repossession after three months from the day the homeowner stopped paying his mortgage.
Stages of Foreclosures:
If you are planning to buy a foreclosure property, there are three ways to find it. The first is the pre-foreclosure stage in which the homeowner is already a defaulter and on the brink of losing his home to foreclosure. The homeowner may opt to sell his distressed property to avoid the trouble of the foreclosure process and to prevent further damage to his credit rating.
Another way to find cheap foreclosure homes is at auctions. All foreclosed properties are placed on the auction for bidding. The laws on foreclosure auction vary by state so it is important that you brush up on the rules before attending an auction.
All foreclosure properties that failed to find buyers at auctions will be reverted back to banks. Real estate owned or REOs are also cheap buys because banks are in a hurry to dispose of their non-performing assets.
To sum it all up, a foreclosure property offers great benefits to smart investors, including low-cost financing, instant equity and great profits.
